3. In the basic real business cycle model where prices are fully flexible, which of the...
3. In the basic real business cycle model where prices are fully flexible, which of the following are associated with changes in aggregate demand?
I. changes in real GDP.
II. changes in inflation.
III. changes in spending growth.
A) I only
B) I and III only
C) II only
D) I, II, and III
E) II and III only
F) None of the above
Quantity theory) In the long run, holding velocity growth constant, the growth of ________ is the cause of inflation.
A) the money supply
B) velocity
C) real GDP
D) the CPI
E) None of the above.
Homework Answers
3. In the real business cycle model, where prices are fully flexible, changes in aggregate demand will always cause change in inflation and change in spending growth.
Answer: option E
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